Become a Financial Risk Manager (FRM^®)

In the finance world, two common designations are the FRM certification and CFA charter. If you’re thinking about becoming a financial analyst or working with investments, these are two designations that could advance your career. So, what’s the difference, and which is right for you? Let’s take a look at the FRM certification versus the CFA Charter.

What is the FRM^® Certification and CFA^® Charter?

FRM^® stands for Financial Risk Manager. Offered by Global Association of Risk Professionals (GARP), FRM certification sets you apart in the global marketplace and gives you a strong understanding of the underlying risk management concepts in today’s ever-changing financial markets. It also lets employers know that you take risk management seriously and that your knowledge has been validated by international professional standards.

The Chartered Financial Analyst^® (CFA) professional credential is offered internationally by CFA Institute to investment and financial professionals. The program covers a broad range of topics relating to investment and portfolio management, financial analysis, stocks, bonds, and derivatives, and provides a generalist knowledge of other areas of finance. Industry professionals worldwide recognize the CFA charter as the “gold standard” of all financial analyst designations.

How are the CFA Charter and the FRM Designation Similar?

Both designate professionals who are knowledgeable in finance and capable of analysis. For each, you must pass a set of exams, and you can’t move to the next level or part until you pass the first. The exams for each require a great deal of study, practice, and commitment to learning and analysis.

Note: It is possible to hold the FRM certification and CFA charter.

How are the CFA Charter and the FRM Designation Different?

FRM certification is more specialized than the CFA charter. Its focus is managing exposure to operational, credit, market, foreign exchange, volatility, liquidity, inflation, business, legal, reputational, and sector risk. The CFA charter requires knowledge and expertise in a much broader range of financial analysis topics, such as portfolio management, economics, reporting, quantitative analysis, and more. Another difference is exam structure. There are two FRM exams (Part I and Part II), and there are three CFA exams (Level I, Level II, and Level III).

FRM^® Certification and CFA^® Charter Requirements

To earn your FRM certification, you need to:

• Take and pass the FRM exams. There are no degree or work requirements for taking the exams.
• Work full-time in a financial risk role for 2 years.
• Demonstrate your experience to GARP by describing your professional role in financial risk management and submitting it to GARP within 5 years of passing Part II.

To become a CFA charterholder, you need to:

• Have a bachelor’s degree (or equivalent) or be in the final year of your bachelor’s degree program (you can register for the CFA exam in the second-to-last year of your undergraduate degree and take it in your final year). If you have 4,000 hours of relevant work experience or a combination of professional work and university experience that totals 4,000 hours, you are also eligible to start the CFA Program.
• Take and pass the Level I, Level II, and Level III CFA exams.
• Become a member of CFA Institute (which costs $275 and includes agreeing to abide by its code of ethics).
• Provide CFA Institute with proof that you’ve been working full-time for 4,000 hours in a role that either involves investment decision-making or with a product that contributes to that process. This can include any work experience you had before passing the exam, as well as after.

Considering earning the FRM designation? Download this free Before You Sit for the FRM^® Exam eBook.

Exam Topics, Formats, Fees, and Pass Rates

In a discussion about FRM certification versus CFA charter, people are most likely to be concerned about the exams. Here’s what you need to know.

FRM Exam Topics

• Foundations of risk management
• Quantitative analysis
• Financial markets and products
• Valuation and risk models
• Market risk measurement and management
• Credit risk measurement and management
• Operational risk and resiliency
• Liquidity and treasury risk measurement and management
• Risk management and investment management
• Current issues in financial markets

There are two parts to the exam. Both Part I and Part II FRM exam windows are in May, August, and November. The format of both parts is multiple-choice. 

The FRM Exam requires a program enrollment fee of $400, which is payable when a candidate initially registers for the FRM Exam Part I. The enrollment fee is not charged again unless the candidate has not passed the FRM Exam Part II within four years after passing the FRM Exam Part I.

Total FRM Program Fees>>

Recent FRM Exam Pass Rates>>

CFA Exam Topics

• Ethical and professional standards
  
• Quantitative methods
• Economics
• Financial statement analysis
  
• Corporate issuers
• Equity investments
• Fixed income
• Derivatives
• Alternative investments
• Portfolio and wealth management

CFA Exam Dates »

The format of the first two levels is multiple-choice. Level III has a written portion called constructed response and a multiple-choice portion. CFA exam fees for each level are $700 for early registration and $1,000 for standard registration. There is also a $400 one-time enrollment fee that you pay when you register for Level I.

Total CFA Program Cost »

Recent CFA Pass Rates »

Preparing for the CFA and FRM Exams

Another similarity between the two designations is that all levels of both exams cannot be passed if all you do is last-minute cramming. So, whether it’s the FRM certification or CFA exam, you should start studying early.

To prepare for the FRM exams, plan to study a minimum of 200–240 hours for each part. The basic strategies you should follow while learning the FRM curriculum include being aware of the big picture and knowing the main concepts. FRM Exam preparation classes for FRM Part I and FRM Part II are recommended, as is focused study. Take as many practice exams as you can. Save one for the last week before the exam.

To prepare for the CFA exams, CFA Institute advises a minimum of 300 hours of study for each level. You should focus on the Learning Outcome Statements (LOS) from CFA Institute because they detail exactly what you are expected to do on exam day. CFA exam preparation classes can really help, as will immersing yourself in practice questions. In addition, you should plan to take as many mock exams as you can to get used to the whole exam process.

Considering taking the CFA exam? Download our free eBook, Before You Decide to Sit for the CFA® Exam, to get advice and tips from past exam-takers.

FRM^® Certification vs. CFA^® Charter: How to Choose

Deciding which designation to pursue really depends on what you want to do as a financial analyst. FRMs typically hold managerial and executive-level positions that concentrate on risk and investment risk.

So, if you’re interested in specializing in analyzing risk as a credit risk manager, market risk manager, regulatory risk manager, or operational risk manager, then the FRM designation is right for you.

If you’re interested in becoming a portfolio manager, research analyst, consultant, risk manager, corporate financial analyst, financial adviser, or moving into the C-suite, then the CFA charter will be a better fit.

Of course, you don’t have to choose at all. As we mentioned near the beginning of this article, you can hold both designations. Today, risk, investment, portfolio management, and financial advising are more intertwined than ever.

So, it makes sense for a CFA charterholder who wants to focus on risk management to earn the FRM designation. However, becoming a Certified FRM first has worked well for some risk analysts who wanted to broaden their overall expertise in finance concepts.

No matter which path you choose, there are lots of CFA and FRM resources out there to help you earn the credential or credentials you need.

If you are considering sitting for the FRM^® Exam, you probably have questions. We’ve created this article to answer the most common questions we receive from people who are taking their first steps toward the FRM designation. You’re always welcome to reach out to Schweser’s knowledgeable Student Support team for help as well.

What is the FRM^® designation?

FRM is an acronym for Financial Risk Manager. Offered by the Global Association of Risk Professionals (GARP), the FRM certification is recognized as the leading certification for risk managers. Those with the FRM designation are in high demand because of their demonstrated ability to anticipate, respond, and adapt to critical risk issues. The FRM designation lets banks and financial firms know that you take risk management seriously, and your knowledge has been validated by international professional standards.

What is the median salary of a Certified FRM^®?

The FRM designation is valued by top employers and recognized globally as the highest standard of achievement in financial risk. As the FRM designation continues to grow, so do its benefits. According to Glassdoor, the average annual salary for financial risk managers in the United States is $101,404. Financial risk analysts earn approximately $56,000. On the top end of the scale are senior financial risk managers or executives, who earn an average of $151,000.

How do I earn the FRM^® certification?

To earn the certification, you must take and pass Part I and Part II of the FRM Exam. There are no education or work requirements for taking the exam, but after you pass both parts, you must demonstrate that you’ve had at least two years of full-time work experience in the field of risk. Finance-related vocations are the only ones considered as acceptable work experience. Examples include portfolio management, industry research, trading, and risk consulting.

Considering earning the FRM designation? Download this free Before You Sit for the FRM^® Exam eBook.

What is the difference between Parts I and II of the FRM^® Exam?

The FRM Exam Part I focuses on the tools used to assess financial risk and contains 100 equally weighted questions. Part II focuses on the application of the tools and contains 80 equally weight questions.

When is the FRM^® Exam offered?

There are two parts to the exam. Both Part I and Part II FRM exam windows are in May, August, and November.  View the FRM exam dates to find specific information about each window.

What is the format of the FRM^® Exam?

Part I of the FRM Exam is computer-based, with 100 multiple-choice questions. multiple-choice exams; each part is four hours in length. Part I has 100 multiple-choice questions. Part II is also computer-based. The Part II exam has 80 multiple-choice questions. Both Parts of the FRM exam are four hours in length.

What topics are covered in the FRM^® Exam?

Part I of the FRM exam tests your knowledge of the tools used for risk management.

FRM Part I Topics and Weights

• Foundations of risk management (20%)
• Quantitative analysis (20%)
• Financial markets and products (30%)
• Valuation and risk models (30%)

FRM Part II Topics and Weights

FRM Exam Part II topics are based on applying the tools tested in Part I and are weighted as follows:

• Market risk measurement and management (20%)
• Operational risk and resiliency (20%)
• Credit risk measurement and management (20%)
• Liquidity and treasury risk measurement and management (15%)
• Risk management and investment management (15%)
• Current issues in financial markets (10%)

What To Do With Difficult FRM Exam Questions »

How much time do I need to dedicate to studying for the FRM^® Exam?

For each part, you need to study a minimum of 200–240 hours, and you should start studying as soon as you’ve registered. You will be tested on your ability to read a question, analyze it, and apply concepts to it. So cramming in the final weeks before the exam won’t help you. The topics require a type of knowledge that can only be gained over a structured, careful course of study—not last-minute, frantic reviews of core materials.

How hard is the FRM^® Exam?

The FRM Exam is very quantitative, and the curriculum takes a lot of time to master. As a result, more people fail Part I than pass it, and barely half of those who take Part II pass it. One reason for this is the variations in the FRM Exam questions.

Some are straightforward, others appear straightforward but have a trick to them, and the wording of still others can be confusing. Therefore, there will undoubtedly be questions on the FRM Exam that give you trouble.

Explore Fellow Candidate's Views On FRM Exam Difficulty

Some self-directed and motivated candidates are able to pass both parts of the FRM Exam using a course of self-study, but many use FRM study materials or classes to stay organized and ensure they are prepared for exam day.

What is the FRM^® Exam pass rate?

The pass rates for both parts of the FRM Exam change after each exam window and lately Part I pass rates have been increasing and Part II pass rates have been stabilizing near historical averages.

How much does it cost to sit for the FRM^® Exam?

The cost to sit for the FRM Exam varies depending on when you register. Enrollment for the FRM Exam requires a one-time enrollment fee of $400 (USD), due when you register for your first Part I FRM Exam, as well as individual exam registration fees.

Total FRM Program Fees »

What are the next steps?

Are you ready for the next step? Check out our FRM Exam prep study packages, designed for all learning styles. Or, learn more about how to become a certified FRM.

How difficult is the FRM^® Exam? The FRM exam is very quantitative, and the curriculum takes a lot of time to master. More people fail FRM Part I than pass it, and barely half of those who take the FRM Part II exam, pass it. As a result, only 25 percent of those who register for the exam end up passing both parts.

One reason for this is the variation in the FRM Exam questions. This article will help you understand the challenge the exam presents and how to improve your odds of success.

About the FRM^® Exam Format

Part I of the FRM Exam focuses on the tools used to assess financial risk. It consists of 100 multiple-choice questions. The exam length is 4 hours. Part II has 80 multiple-choice questions, and it is also 4 hours long. Its focus is the application of the tools for assessing financial risk. To learn more about each part of the exam, check out our FAQ for the FRM Exam.

FRM^® Exam Pass Rate

Since 2013, the pass rates for both parts of the FRM Exam have averaged between 40 to 60 percent.

Recent FRM Pass Rates >>

FRM^® Exam Topics

The topics covered by both parts of the FRM Exam can change periodically because the world of financial risks is fluid.

FRM^® Part I Exam Topics and Weights

• Foundations of risk management (20%)
• Quantitative analysis (20%)
• Financial markets and products (30%)
• Valuation and risk models (30%)

You are more likely to pass the exam if you pass the topics with weights over 20 percent. Based on this table, the topics you really want to get right are financial markets and products, and valuation and risk models.

Are you thinking about taking the FRM Exam? Download the free eBook, Before You Sit for the FRM^® Exam, for invaluable advice from successful FRM professionals.

FRM^® Part II Exam Topics and Weights

• Market risk measurement and management (20%)
• Operational risk and resiliency (20%)
• Credit risk measurement and management (20%)
• Risk management and investment management (15%)
• Liquidity and treasury risk measurement and management (15%)
• Current issues in financial markets (10%)

For Part II, if you pass the three topics that are weighted 20% and one rated 15%, you have a good chance of passing it.

FRM^® Exam Study Tips: How to Increase Your Odds of Success

The FRM Exam requires a significant investment of time to be successful. But most of the time, failing a part of the exam is the result of study mistakes and insufficient prep. These tips will help you develop the knowledge and confidence necessary to pass both parts of the FRM Exam.

Tip #1: Put in the study time

GARP says candidates should study at least 200–240 hours for each part of the exam, or 400–480 hours total. Don’t take this suggestion lightly. You’re going to be tested on your ability to read a question, analyze it, and apply concepts to it. Starting early will help ensure you leave yourself enough time to first master the concepts and then practice answering the questions.

Tip #2: Don’t put off studying

Both parts of the FRM Exam are nearly impossible to pass if all you do is last-minute cramming. Instead, you should start studying as soon as you’ve registered. Passing the FRM Exam requires a type of knowledge that can only be gained over a structured, careful course of study—not eleventh-hour, frantic reviews of core materials.

Tip #3: Develop and follow a study plan

A well-thought-out study plan is essential. If you’re not sure how to build one on your own, FRM study materials can help. They offer online and classroom courses, calendar tools that organize the curriculum and materials for you, access to banks of practice questions, and realistic mock exams.

Tip #4: Focus on practicing in the final weeks before the exam

If possible, take some time off from your job in the final weeks before each part of the FRM Exam and save at least one  FRM Part I mock exam for that time. Treat this exam as if it were the real thing. Don’t look at it or study questions from it beforehand. Time yourself, so you can get a feel for the time constraints and pressure of exam day.

Tip #5: Have a plan for staying calm on exam day before you get to the exam center

A good strategy is to answer the easy questions first to build confidence. For more difficult questions, reread them to make sure you understand. If you still can’t find the best answer, eliminate at least one option, and take an educated guess. Also, if you’re struggling with several difficult questions in a row, take a deep breath for a few seconds, and remind yourself you can get 30 percent of the questions wrong and still pass.

Ready for the Challenge?

Improve your test-taking skills, and gain confidence leading into exam day with Kaplan Schweser’s FRM Part I Final Review or FRM Exam Part II Final Review. Enroll today!

If you want to further your credentials as a risk manager, move forward in your professional development, and have certain qualities you might be thinking about becoming a certified Financial Risk Manager (FRM).

Offered by the Global Association of Risk Professionals (GARP), the FRM^® designation lets employers know that you take risk management seriously, and your knowledge has been validated by international professional standards. In addition, you have to pass the FRM Exam, which also demonstrates your expertise.

How do you become a Certified FRM?

Step 1: Register to Take the FRM^® Exam Part I

Anyone can register to take the exam by visiting www.garp.org; there are no education prerequisites. There are two parts to the exam. Both Part I and Part II FRM exam windows are in May, August, and November. The cost of registering for the exam is structured into two registration periods: early and standard. It’s possible to take both parts of the exam on the same day, but if you decide to try it, note that your Part II answers will be graded only if you passed Part I.

Considering Financial Risk Management as a career? Download the free Before You Sit for the FRM^® Exam eBook for advice from successful FRM professionals.

Step 2: Pass FRM^® Exam Part I

Passing Part I of the exam takes dedication and commitment. Of those who took Part I between 2010–2017, the average pass rate was 46%. So, plan to spend at least 200 to 240 hours studying. GARP reports that the average time of study is 275 hours and that some candidates study up to 400 hours. 

Part I of the FRM Exam has 100 equally weighted multiple-choice questions. You’ll be notified when your results are available in your GARP candidate portal.

FRM Part I Exam Topics and Weights

• Foundations of risk management - 20%
  
• Quantitative analysis - 20%
  
• Financial markets and products - 30%
  
• Valuation and risk models - 30%
  

Step 3: Register for Part II

GARP gives you up to four years to register after you receive your notification that you’ve passed Part I. Check www.garp.org for the costs and schedules, and register within the time window indicated.

Step 4: Pass FRM^® Exam Part II

Part II consists of 80 equally weighted questions. Of those who took Part II between 2010–2017, the average pass rate was 57%. Passing Part II takes the same amount of dedication and commitment as Part I, so put in your 240 or more hours of study. This will better the odds that you’ll get good news when your results are posted in your candidate portal.

FRM Part II Exam Topics and Weights

• Market risk measurement and management - 20%
  
• Credit risk measurement and management - 20%
• Operational risk and resiliency - 20%
  
• Liquidity and treasury risk measurement and management - 15%
  
• Risk management and investment management - 15%
  
• Current issues in financial markets - 10%
  

Step 5: Get Two Years of Experience

The final step in becoming a Certified FRM is demonstrating that you’ve had at least two years of full-time work experience in the field of risk. Finance-related vocations are the only ones considered as acceptable work experience. Examples include portfolio management, industry research, trading, and risk consulting.

To demonstrate this experience, you describe your professional role in financial risk management in at least five sentences and submit it to GARP within five years of passing Part II of the FRM Exam. After you submit your description, GARP will confirm that you are a Certified FRM holder and have been included in its registry.

Starting Your FRM^® Journey

If you’ve decided to pursue a career as a certified FRM, a good FRM exam prep program can increase your odds of passing Part I and Part II of this challenging exam.

Where there is a finance enterprise, there is financial risk. Therefore, financial risk management is an essential aspect of running a successful financial firm. It is a skill set that’s in high demand, but what exactly is financial risk management? What does it entail? What kind of careers does it offer? This article tells you everything you need to know, including what it is, the techniques used, what is required, and careers in the field.

What is Financial Risk Management?

To paraphrase Wikipedia, financial risk management is a finance practice that uses financial instruments and data analysis to manage exposure to operational, credit, market, foreign exchange, shape, volatility, liquidity, inflation, business, legal, reputational, sector, and other types of risk. The purpose of this practice is to identify the sources of risk, measure it, and develop plans to address it.

Most major retail, commercial, and investment banks have financial risk management practices or departments. However, as you can imagine, it is not limited to banking. You can find financial risk management at nearly every major asset management firm, hedge fund, consulting firm, and regulator in the world.

The long laundry list of risks from the Wikipedia definition aside, in the world of finance, financial risk management is usually applied to four types of risk:

• Market risk: This is the possibility of incurring large losses from adverse changes in financial asset prices, such as stock prices or interest rates.
• Credit risk: This is the risk that borrowers will not repay their debt obligations in full when they are due.
• Funding (or liquidity) risk: This is the risk that a firm cannot obtain the funds necessary to meet its financial obligations, such as short-term loan commitments.
• Operational risk: This is the risk of monetary loss resulting from inadequate or failed internal processes, people, and systems or from external events.

Financial Risk Management Techniques

The techniques used in financial risk management differ based on the kind of risk involved. For market risk management, statistical models are used to forecast the probability and extent of significant change in market prices. Called “value-at-risk” models, they are used to set capital against potential losses. Firms also use stress tests that examine the impact of large hypothetical market movements on their portfolio values.

Managing credit risk starts by setting different levels of individual borrower, industry sector, and geographic area credit limits, all of which are usually based on internal credit ratings. Firms also use quantitative models to measure and manage credit risk.

To manage funding risk, banks and firms diversify their funding sources, hold liquid assets, and make contingency plans, such as a backup line of credit. They set funding goals as benchmarks to measure their current funding levels and take action when they are below certain thresholds.

Operational risk management requires studying how the bank, firm, or company is run, creating a comprehensive view of the business, and addressing anything that it appears might do the bank, firm, or company damage in the future. The steps involved are risk assessment, measurement and mitigation, and monitoring and reporting.

Considering Financial Risk Management as a career? Download the free Before You Sit for the FRM^® Exam ebook for advice from successful FRM professionals.

What Are the Requirements for Financial Risk Management?

Here are the requirements for financial risk management, including education, skills, and qualities:

• College and graduate degrees: A career in this risk field requires a bachelor’s degree, but a graduate degree is preferred, especially an MBA or a doctorate in finance or economics. A PhD in statistics or physics is a viable alternative. Many of those in the field also earn the FRM^® designation, a certification offered by the Global Association of Risk Professionals (GARP).
• Financial acumen: Strong financial knowledge is required. Also critical is actual experience working with numbers in a variety of situations, from contract for difference (CFD) trading to translating objective concepts into measurable items.
• An analytical and strategic mind: Because of all the data involved, anyone who works in the field should be analytical by gathering information, interpreting it, spotting risk and opportunities, and identifying appropriate strategies for managing financial risk.
• Technology capabilities: Anyone in this field should be able to use software and other technological solutions, such as Risk (VaR) to Risk Scenario tools. In addition, it is important to keep up with the latest technological advancements in financial risk management.
• Excellent communication skills: Those who work in financial risk management must be able to translate complex financial risk, products, and processes into a language the front office, management, and the board can understand. For this to work well, excellent interpersonal and general communication skills are a necessity.

Our article on the qualities needed in financial risk management offers an even more detailed breakdown of these requirements.

Financial Risk Management Careers

Financial risk management careers are most often found in financial institutions such as banks, financial services companies, brokerages, and asset management firms. However, there are opportunities in other types of business, as well, such as insurance, software, oil and gas, and publishing companies. The following job roles are the most common:

• Risk analyst or risk manager: These financial risk professionals use analytical skills and knowledge of international business and currency markets to examine investment portfolios and analyze the risk involved. They project potential losses and recommend ways to limit risk through diversification, currency exchanges, and other investment strategies.
• Credit risk analyst: These analysts review and assess the financial history of individuals or companies to determine if they are a good candidate for a loan. They evaluate financial data, such as balance sheets and income statements, to determine the level of default risk and calculate financial ratios to help lenders make comparisons.
• Market risk analyst: These financial risk management practitioners use knowledge of an industry or sector to research market trends and provide companies or investors with a comprehensive market assessment. The company or investor then uses this information to make decisions about investments and future ventures.
• Operational risk manager: These risk managers investigate how an organization or business is run and identify potential sources of financial, legal, and reputational damage. The goal is to mitigate as much risk as possible and offset financial losses.

These positions are just the tip of the financial risk management iceberg. You can get more details on them and explore other careers in financial risk management here.

Why Consider a Future in Financial Risk Management?

The future is bright in financial risk management. It is a respected profession because financial risk management professionals are critical to the functioning of a business. As a result, the salaries for these positions are promising. According to PayScale, they can range from $55,000 to $150,000 annually. Its popularity as a career is also on the rise. Positions in the field are expected to increase at a rate of 7% over the next decade.

How to Get Started in a Financial Risk Management Career

As noted in the section about the requirements for a financial risk management career, you should be focused on finance or a related field for your bachelor’s degree and have your eye on master’s or PhD. Earning the FRM designation can also help you secure a position in this field because it demonstrates to potential employers that you have a mastery of the important concepts in risk management. If this career move appeals to you, our FRM Exam prep study packages can certainly help you on your journey.

If you’re considering a career in finance or risk, it’s a credential that might interest you because it can set you apart in the financial services industry. In this article, you’ll learn exactly what the FRM^® designation is, what a financial risk manager does, how you can become a Certified FRM, and what you can do with the designation.

What the FRM^® Designation Is

Offered by the Global Association of Risk Professionals™ (GARP^®), the FRM designation is a financial risk management certification you can earn. Many of the top financial firms employ Certified FRMs because they are seen as having attained the “gold standard” of the industry. The FRM designation indicates that you have a strong understanding of the underlying risk management concepts in today’s ever-changing financial markets. It also lets employers know that you take risk management seriously and that your knowledge has been validated by international professional standards. In addition, you have to pass the FRM Exam, which also demonstrates your expertise.

What a Financial Risk Manager Does

A financial risk manager identifies and analyzes threats to the assets, earning capacity, or success of a business. Financial risk managers work in sales, loan origination, trading, marketing, financial services, or private banking. Many specialize in areas like credit or market risk. They analyze data, financial markets, and world events to forecast changes and trends that can impact a business and suggest or implement strategies for protection.

Not all financial risk managers have earned the FRM designation. To earn the designation, you must complete the FRM Program administered by GARP.

For anyone who wants to be a financial risk manager, the future is bright. Positions in risk management are expected to grow at a rate of 7% over the next decade. In addition, the salaries for these positions are quite encouraging. According to PayScale and other sites, salaries can range from $55,000 to $150,000 annually.

How to Earn the FRM^® Designation

To earn your FRM designation, you must:

• Take and pass the FRM Exam, which consists of two parts. Part I has 100 multiple-choice questions, and Part II consists of 80 questions. Both parts cover topics such as the foundations of risk management, quantitative analysis, financial markets and products, valuation and risk models, current issues in financial markets, measuring financial risk, and more. There are no degree or work requirements for taking the exams.
• Work full-time in a financial risk role for at least two years.
• Demonstrate your experience to GARP by describing your professional role in financial risk management and submitting it to GARP within five years of passing Part II of the exam.

In our article about how to earn the FRM designation, you can take a closer look at the requirements.

Are you thinking about taking the FRM Exam? Download the free eBook, Before You Sit for the FRM^® Exam, for invaluable advice from successful FRM professionals.

What You Can Do With the FRM^® Designation

Those who earn the FRM designation typically hold positions that concentrate on analyzing and measuring risk. These are some of the most common job roles for Certified FRMs:

• Risk analyst: Uses analytical skills and knowledge of international business and currency markets to examine investment portfolios and analyze the risk involved.
• Risk manager: Helps a business identify and assess potential risks that could affect it in the future, zeroing in on potential threats to assets, earning capacity, or success.
• Credit risk analyst: Evaluates financial history to determine if a person or a company is a good candidate for a loan.
• Market risk analyst: Provides companies or investors with a comprehensive market assessment to help them make decisions about investments and future ventures.
• Regulatory risk analyst: Studies new and proposed laws to determine how they will affect a company or firm and recommends ways to ensure compliance.
• Operational risk manager: Investigates how an organization or business is run, looks at the big picture, and fixes or prepares for anything that might harm the company.
• Chief risk officer: Implements policies at the senior executive level to reduce operational risks and minimize losses if a system or process is inadequate or fails.

Although an FRM designation is no guarantee you’ll land a management position or a spot in the C-suite, a significant percentage of Certified FRMs have worked their way up to these levels. You can explore these positions in more detail in this article covering what you can do with the FRM designation.

Ready to Learn More about Earning the FRM^® Designation?

If you’re wondering if earning the FRM designation is right for you, check out these reasons why you should pursue the FRM designation. When you’re ready to get started, Kaplan Schweser has FRM exam prep packages to increase your odds of success!

With the Financial Risk Management (FRM^®) designation, you have a credential that can set you apart in the financial services industry. Many of the top financial firms employ FRM certificate holders because they are seen as having attained the “gold standard” of the industry. But, what kind of jobs are available to you and where? Let’s take a look.

Where Certified FRMs^® Work

The recent well-publicized problems at a large US bank has led at least one industry expert to encourage major retail, commercial, and investment banks to hire more risk experts. However, FRM professionals are not limited to banking. According to GARP, which administers the FRM Exam and designation, Certified FRMs are also currently employed internationally at nearly every major asset management firm, hedge fund, consulting firm, and regulator in the world. Certified FRMs are most likely to be risk analysts, risk managers, credit risk analysts, market risk analysts, regulatory risk analysts, operational risk managers, or chief risk officers.

Risk Analyst

Risk analysts use analytical skills and knowledge of international business and currency markets to examine investment portfolios and analyze the risk involved. They project potential losses and recommend ways to limit risk through diversification, currency exchanges, and other investment strategies.

Some also identify and report on asset losses, monitor investment trends, and aggregate data for analysis and reporting. Risk analysts are most commonly found in banks, insurance companies, mortgage firms, and consulting organizations, but some publishing houses and software development companies also hire them.

Considering Financial Risk Management as a career? Download the free Before You Sit for the FRM^® Exam eBook for advice from successful FRM professionals.

Risk Manager

Risk managers help a business identify and assess potential risks that could affect them in the future. Many are responsible for analyzing investment approaches, including asset allocation, hedge funds, and fixed income.

Their main focus is zeroing in on potential threats to the assets, earning capacity, or success of a business. They use their research to forecast changes and trends that will impact the business, make recommendations on investment strategies, and help businesses develop plans to limit risk. Risk managers work in sales, origination, trading, marketing, financial services, and private banking.

Credit Risk Analyst

Also called credit risk managers or credit analysts, credit risk analysts review and assess the financial history of a person or company to determine if they are a good candidate for a loan. Many factors can affect creditworthiness, and credit risk analysts must sift through them all to make their determination.

They evaluate financial data, such as balance sheets and income statements, to determine the level of default risk. They also calculate financial ratios to help lenders make comparisons and prepare reports for both the client and the lender. Lending institutions like banks or insurance companies are the main employers of credit risk analysts, although some work for asset management companies, private equity firms, or rating agencies.

Market Risk Analyst

Also called market risk managers, market risk analysts use their knowledge of an industry or sector to research market trends and provide companies or investors with a comprehensive market assessment. The company or investor then uses this information to make decisions about investments and future ventures.

To determine the probability of asset loss or reward from investments in their particular industry, market risk analysts review statistics, develop risk management systems, consult with securities traders, and present the results of their research. From banks to energy companies, almost all companies that buy or sell stocks or make investments hire market risk analysts.

Regulatory Risk Analyst

Legislation and regulations can affect companies in certain sectors. Regulatory risk analysts study new and proposed laws to determine how they will apply to their firms and research the impact similar laws have on businesses in other regions, states, or countries.

They model various possibilities and recommend or develop ways to ensure compliance. If there is a period for comment before laws are final, regulatory risk analysts often respond on behalf of their companies. The financial industry employs the most regulatory risk analysts, but they can also be found in healthcare, oil and gas, utilities, and engineering companies.

Operational Risk Manager

The Basel Committee on Banking Supervision describes operational risk as “the risk of loss resulting from inadequate or failed internal processes, people, and systems, or from external events.” These losses can be caused by several factors, such as fraud, negligence, or machine and human error.

Operational risk managers investigate the way an organization or business is run, look at the big picture, and fix or prepare for anything that might harm the company in the future. The goal is to mitigate as much risk as possible and offset financial losses.

They often use statistical modeling techniques and threat assessment to ensure the financial controls in place are effective. Operational risk managers usually work in banks, but some insurance companies, asset management firms, consulting firms, software vendors, and retail giants employ them as well.

Chief Risk Officer

Chief executives make the strategic decisions that drive the success and direction of an organization. Although an FRM designation is no guarantee you’ll land in the C-suite, a significant percentage of Certified FRMs have worked their way up to this level as chief risk officers.

These executives assess and mitigate significant competitive, regulatory, and technological threats to a company’s capital and earnings at the senior executive level. They implement policies to reduce operational risks and ways to minimize losses in the event a system or process is inadequate or fails entirely. Most large businesses and organizations today have an enterprise risk management program led by a CRO or equivalent.

Interested in Pursuing the FRM^® Designation?

Although earning the FRM designation does not guarantee you a job, it can make a difference when an employer is deciding between two otherwise equally qualified candidates. Passing the FRM Exam and earning the designation takes hard work and dedication. It demonstrates to potential employers that you have a mastery of the important concepts in risk management.

Therefore, companies are more likely to choose candidates with the FRM designation. It’s a career move worth considering. Our FRM Exam prep study packages can certainly help you on your journey.

Get an inside look at Kaplan Schweser’s cornerstone FRM^® Exam review tool. In this introductory topic from our FRM Part I Book 1 SchweserNotes™, we introduce fundamental risk management concepts that are integral to the risk management industry. The topic begins by defining the concepts of risk and risk management and outlines the general risk management process and its potential shortcomings. We also explain types of risk measures, fundamental concepts underlying risk and reward, and the different classifications of risk. This topic is a brief but informative overview of the risk management concepts you will encounter in the FRM Program.

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Get Advice from Past Exam Takers

If you are wondering if the FRM^® designation is a good fit for your career, this eBook is for you. We’ve enlisted the help of FRM professionals who have successfully gone through the program and asked them for advice on what it takes to earn the designation and succeed in the risk management field. We brought all of their advice together in this eBook to help you decide if the FRM designation is right for you.

How to Download the Before You Sit for the FRM^® Exam eBook

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The FRM^® designation sets you up well for growth in your career as a finance professional. But what kind of salary can you earn? According to Payscale and Glassdoor, the annual salary for a professional who works in financial risk is anywhere from $44,000 to $128,000. 

A professional who has earned the FRM designation can expect a salary in the range of $55,000 to $211,000, with managers and senior directors earning more. Let’s look at what the average salary is for some of the most common jobs for those with FRM certification.

Risk Analyst

Risk analysts use analytical skills and knowledge of international business and currency markets to examine investment portfolios and analyze the risk involved. Glassdoor reports that the average base annual salary for a risk analyst with the FRM designation is $61,833 with an average additional cash compensation of $6,467. Although Glassdoor estimates that the top end of the base salary range is $89,000, a risk analyst in Dallas with 10 years of experience and the FRM mark recently reported a salary of $97,000.

Market Risk Analyst

Market risk analysts, also known as market risk managers, use their knowledge of an industry or sector to research market trends and provide companies or investors with a comprehensive market assessment. Zip Recruiter reports that annual salaries for market risk analysts are as high as $144,500 and as low as $56,500, but they usually range between $92,000 and $121,000. According to indeed.com, the average base salary is $93,280.

Regulatory Risk Analyst

Regulatory risk analysts study new and proposed laws and regulations to determine how they will apply to their firms and research the impact similar laws have on businesses in other regions, states, or countries. They model various possibilities and recommend or develop ways to ensure compliance. Glassdoor reports that the average annual salary for these risk analysts is $67,021; however, the ads they post show a wide range of salaries from a low of $51,000 to $130,000. Regulatory risk managers can earn as much as $209,000.

Risk Manager

Risk managers help a business identify and assess potential risks that could affect them in the future. Many are responsible for analyzing investment approaches, including asset allocation, hedge funds, and fixed income. Glassdoor reports that risk managers with the FRM designation can expect to earn a base annual salary of $115,000 to $125,000. According to indeed.com, 68 percent of risk managers in the U.S. think their salaries are appropriate for the cost of living in their area.

Are you thinking about taking the FRM Exam? Download the free eBook, Before You Sit for the FRM^® Exam, for invaluable advice from successful FRM professionals.

Credit Risk Manager

Credit risk managers develop and implement policies and procedures that reduce credit risk for a financial institution and manage the process of building financial models that predict credit risk exposure to the organization. Many employers require credit risk managers to earn the FRM designation. The average annual salary is $105,830 as reported by Payscale.

Operational Risk Manager

Operational risk managers investigate the way an organization or business is run, look at the big picture, and fix or prepare for anything that might harm the company in the future. The goal is to mitigate as much risk as possible and offset financial losses. Salary.com says that the average annual salary of operational risk managers is $112,759. Zip Recruiter indicates that the salary range is $101,500 to $141,000.

Chief Risk Officer

An FRM designation will not necessarily land you in the C-suite. However, there are risk professionals with the FRM certification who have worked their way up to this level. These executives assess and mitigate significant competitive, regulatory, and technological threats to a company’s capital and earnings at the senior executive level. Because they are executives, the way they are compensated can differ from company to company.

Therefore, the average annual salary for the position is reported differently by the major job search engines. For example, Salary.com says it is $254,400, Glassdoor reports that it is $195,747, and Payscale records it as $153,550.

Interested in Pursuing FRM^® Certification?

Although earning the FRM designation does not guarantee you a higher salary, it can help. Passing the exam is your first step in earning the FRM certification, and our FRM exam study packages can help.

GARP is an abbreviation of Global Association of Risk Professionals, the preeminent globally recognized non-profit membership association for risk managers. As part of its mission, GARP is dedicated to advancing the risk profession globally. In this article, you’ll learn about the history of GARP, its structure and activities, and how it relates to the FRM^® certification and you.

GARP Then and Now

According to a finance publication that was popular in the 1990s, GARP was founded in 1996 by Marc Lore and Lev Borodovsky, two risk managers. They had been meeting once a week at a New York pub to talk about their chosen field with other risk colleagues and decided that a more formal organization would benefit other risk professionals. About six months later, they had 250 members from 23 countries. Before long, local chapters from around the world had been established by regional directors, offering programs for local members.

In 1997, a year after they founded GARP, Lore and Borodovsky introduced the Financial Risk Manager (FRM) certification, which could be earned by paying a fee and passing an exam. Since the FRM designation was introduced, financial risk management has become entrenched in most firms. An estimated 50,000 people have earned the certification.

Fast forward to today. Based on the information on their LinkedIn page, GARP has 150,000 members from 195 countries. Lore and Borodovsky have left the organization, and it is now headed up by a Board of Trustees. The current chairman is Bradford Hu, Chief Risk Officer at CitiGroup. Twenty-eight Chapter Directors represent 20 chapters in more than 12 countries around the world, giving risk professionals the opportunity to meet and learn from one another.

GARP members have a voice in industry research, numerous opportunities to network, and access to risk intelligence. They also participate in local, national, and global events. They have access to risk-related content, discounts on GARP products and the annual GARP convention, and special offers from GARP partners. Interestingly, you do not have to be a member of GARP to maintain either of their risk certifications.

Are you thinking about taking the FRM Exam? Download the free eBook, Before You Sit for the FRM^® Exam, for invaluable advice from successful FRM professionals.

GARP and Education

GARP primarily sees its mission as providing research, offering education, and promoting risk best practices. In addition to the FRM certification, which is now considered the globally recognized standard for those who manage financial risk, GARP also offers the Energy Risk Professional (ERP^®) certification, a designation for energy professionals.

Beyond the designations, the organization also leads the GARP Benchmarking Initiative and the GARP Risk Institute. The non-partisan GARP Benchmarking Initiative analyzes regulatory quantitative impact studies. The GARP Risk Institute offers risk thought leadership and research, uncovering trends and challenges in risk management and its industries. Aiming for unbiased analysis of critical issues, the institute also publishes articles and reports on financial and environmental risk topics.

GARP and the FRM^® Certification

GARP administers the FRM certification and provides the content for Part I and Part II of the FRM Exam, which is offered in May and November of each year. (This FRM Exam FAQ has all the details.) Holding the FRM certification demonstrates proficiency in managing exposure to operational, credit, market, foreign exchange, volatility, liquidity, inflation, business, legal, reputational, and sector risk. You can find FRM professionals in many different companies and businesses.

To earn your FRM certification, you need to take and pass both parts of the FRM Exam. There are no degree or work requirements for taking the exams. However, you must work full-time in a financial risk role for two years and demonstrate your experience to GARP within five years of passing Part II of the exam. To do this, you describe your professional role in financial risk management and submit it to GARP.

Total FRM Program Fees »

GARP and You

If a career in financial risk is your goal, a GARP membership can help you achieve it. You’ll have access to a career center and networking opportunities. Plus, earning the FRM will definitely give your career a boost. If you’re interested, you can explore FRM study packages that can increase your odds of passing the FRM Exam the first time and earning your certification.

Passing the exam and obtaining the FRM^® designation to become fully certified is essential for anyone hoping to become a financial risk manager. However, like any profession, in order to develop into a truly successful FRM, it will take time, experience, and a lot of work. There are certain qualities that you may already possess or should aim to develop and improve before, during, and after working towards the FRM designation to increase your chance of success.

How To Become A Certified FRM »

Financial Acumen

It should go without saying that strong financial knowledge is required. For positions such as quantitative risk managers, firms will look for applicants with PhDs in statistics and physics, for example. The very top finance businesses will seek those with MBAs and doctorates firmly in the financial and economic fields.

Experience working with numbers in a variety of situations, from CFD trading to translating objective concepts into measurable items, will be of benefit. Some people are naturally gifted at working with numbers, while others have to work at it more. Whichever of these is you, pursuing financial education is vital for a career in risk management.

An Analytical and Strategic Mind

Working with high levels of data requires a financial risk manager with an analytical mind and a great eye for detail. The ability to not only gather such information but also be able to interpret it, spot risks and opportunities, and apply appropriate processes is required.

This analytical mind needs to be forward-thinking and strategic, as to manage any kind of financial risk, you need to spot it before it occurs. For financial risk managers who wish to really push on and work their way to the top, being able to apply an analytical approach over a range of clients and the bigger picture of the whole firm will boost your chances of working toward this.

Considering earning the FRM designation? Download this free Before You Sit for the FRM^® Exam eBook

Technological Capabilities

As technology continues to advance, so too do the tools used in financial risk management, from Value at Risk (VaR) to Risk Scenario tools. Beyond just being able to use these tools, it’s important to stay up-to-date with the industry and adapt to best practices for using the latest technology developed for specialized and wider financial risk management.

A background in computer science isn’t necessary, yet an interest and ability for improving processes, such as crunching big data, will prove incredibly useful. Often, a strong financial and numerical knowledge goes together with this.

Strong Communication Skills

Almost every job requires some level of communication. In the world of financial risk management, this is truer than ever. Every FRM is expected to translate complex financial risk, products, and processes into a language the front office, management, and the board can understand. For this to work well, excellent interpersonal and general communication skills are a necessity.

This links to networking, which is highly advantageous to open up new opportunities in FRM and to increase your awareness and knowledge. Communicating across many platforms, from face-to-face to social media, will play a big part in the role.

Challenge the System

Regulatory requirements have increased greatly since the global financial crisis, and it looks to develop even further in the next 10 or so years. Therefore, ensuring compliance is met, and working closely with such departments to do so, will be more important than ever.

That’s not to say simply following the rules will lead to a successful FRM career. The most successful risk managers work the best out of regulation and challenge traditional practices and methods, where appropriate. Adapting to changing situations, and putting forward new ideas and processes, could see you take advantage of untapped opportunities, so questioning and challenging the normal can be advantageous.

These qualities are what top firms look for in financial risk managers, so developing and improving these is highly advisable for a successful and rewarding career.

Are you interested in analyzing risk and figuring out ways to minimize it in a company or portfolio? Or perhaps you’ve already decided you want a career in financial risk management. If so, you should consider becoming a certified Financial Risk Manager (FRM^®). Here are three excellent reasons why.

1. FRM^® certification can help you differentiate yourself.

With the FRM designation, you have a credential that can set you apart in the financial services industry. As the need for financial risk management professionals continues to grow, someone with the FRM designation is seen as having attained the “gold standard” of the industry. Many of the top financial firms employ risk management professionals who have the FRM certification.

Why do these firms look for finance professionals with the FRM designation? Mainly because they have specific qualities that are important to financial services providers. Risk management is a different way of approaching financial decision-making. The FRM Program teaches you how to better identify and allocate potential risks, mitigate them, provide recommendations for better decisions in regard to all risks, and make a risk management plan.

The program also helps you improve how you prioritize risks, ensure they are aggressively and cost-effectively managed, and provide directions and recommendations on issues that are critical for success. This new mindset and process of assessing risks, developing a response to risks, and creating a contingency plan for future risk prevention will make you an asset to most financial services firms.

Considering earning the FRM designation? Download the free eBook Before You Sit for the FRM^® Exam, for advice from successful FRM professionals.

2. The FRM^® designation can boost your career opportunities.

The FRM designation can help you get where you want to go in your career. Since the FRM Program began in 1997, its popularity has grown, and enrollments increase every year. Those with the FRM designation typically hold managerial and executive-level positions that concentrate on risk and investment risk.

These financial management positions, including financial risk manager positions, are expected to grow at a rate of 7% over the next decade. In addition, the salaries for these positions are quite encouraging. According to PayScale and other sites, salaries can range from $55,000 to $150,000 annually.

So, if you’re interested in a good salary as a credit risk manager, market risk manager, regulatory risk manager, operational risk manager, or risk executive, then the FRM designation can help you get there. As the field’s leading designation, the FRM certification is the easiest way for firms to identify candidates with proven ability and experience. After all, earning the credential isn’t easy.

You have to pass a series of difficult exams and spend at least two years working in the field. The FRM certification tells employers that you can identify, analyze, and mitigate risk at a high level, thereby adding value to a firm in a number of specialized areas.

FRM Exam FAQs »

3. You can grow your global networking connections.

Global acceptance of the FRM Program has increased. In fact, it has experienced a compound annual growth rate of 29% in total registrants in the last eight years. Therefore, anyone who becomes one of over 32,000 global FRM certification holders can tap into a wide network of experts. Connecting with them can lead to a broader understanding of the global financial markets.

You also get first-hand exposure to industry insights and trends, an opportunity to increase your technical know-how, and awareness of forthcoming developments that could impact your career.

Ready to learn more about earning the FRM^® designation

If the benefits of pursuing this globally recognized certification appeal to you, check out this article about how to become a Financial Risk Manager. When you’re ready to earn the designation, Kaplan Schweser has FRM exam prep packages to increase your odds of success.

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